Should Wall Street have seen the problems brewing at Facebook?
The company’s stock plunged 19 percent on Thursday, wiping out roughly $120 billion of its market value, after it reported disappointing financial results that surprised investors and stock analysts.
Spotting trouble at companies is never easy. Senior executives often don’t go out of their way to shed light on difficulties, and they may be slow to see problems. But Wall Street firms and investment managers pride themselves on having a strong grasp of what’s going on at large companies. In Facebook’s case, they clearly didn’t, even though there was much that was concerning. Here are some of the things that were missed.
But the scandals and new rules may be creating an environment in which people become less enthusiastic about Facebook’s platforms and use them less, further slowing growth in advertising revenue. User numbers fell in Europe in the second quarter.
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